Taboos that will not be challenged

What the summit should have focused on.

European Voice

5/23/12, 9:24 PM CET

Updated 1/22/16, 12:40 PM CET

Not for the first time, the European Union has set itself up for a fall. An informal meeting of the leaders of the member states – such as was called for last night (23 May) – is a well-rehearsed gambit. Indeed, it has become so familiar that the financial markets treat it with the contempt it deserves. A getting-to-know-you meeting with François Hollande, newly elected president of France, had a superficial plausibility, but as has so often been the case in the eurozone’s drawn-out debt crisis, the EU could not hope to meet expectations. Calling a meeting suggests that the leaders might come up with an answer to the eurozone’s woes. But such is the gap in understanding between Greek politicians on the one hand and German ministers and central bankers on the other that there is little prospect of coherence.

Here, then, are a few suggestions as to what last night’s dinner meeting should have talked about. Most of them are too daring for the unadventurous taste of the current European Council, but arguably that makes them more appropriate to this moment of exceptional stress for the eurozone and the EU. A few taboos need breaking.

First, let us break the taboo about taxation. Greece’s tax-collection service is not fit for purpose. There is little prospect of Greece meeting the obligations that have been piled upon it, if it does not improve its revenue-raising ability. Greece needs external help to improve its fiscal take. Put whatever label you like on that – EU, OECD – but this is an instance where respect for national independence on tax matters is in the interests of nobody (except those evading taxes).

Secondly, the EU must get to grips with Spain’s banks. There is no point in being polite. Putting up a firewall round the non-Greek eurozone makes no sense while Spain’s banks are emitting inflammatory sparks. The EU should admit that a sequence of stress-tests of the banking sector have been inadequate. The credibility of the Spanish central bank has been shot to pieces. The eurozone should send someone else in to assess the damage.

Thirdly, what is necessary for Spain is good for everyone else as well. Unless the eurozone’s leadership has an accurate assessment of where the bad debts are and how big they are, then all calculations – such as how much damage a Greek exit from the eurozone might do – are phoney.

Fourthly, the European Council should own up that there must be a genuine re-writing of the EU’s rules – the governing treaties – and soon. Tiptoeing around, trying to avoid a treaty re-write, only makes things worse. Germany opposes changes to the European Central Bank that it thinks conflict with the current treaty. The UK opts out of fiscal compacts. Lance the boil. Change what needs changing. Yes, that means winning popular approval for change. But change is coming anyway – and not getting popular approval is a greater fault.

Fifthly, the European Council should agree to bring forward its negotiations on the 2014-20 spending period. The established practice on EU budget negotiations is to postpone and prevaricate. But if the negotiations were intensified and included in the crisis talks, then everyone would see that the sums of money involved are relatively insignificant. The member states might even discern that their common interest is in securing the health of the euro and the eurozone and restoring economic growth. The EU should concentrate on what matters.

None of these ideas is put forward with any expectation that they will be taken up. They will be considered unrealistic and impractical. However, perhaps the European Council might care to reflect that being realistic and practical and pragmatic is what brought us to this sorry juncture. The chosen tactic throughout the eurozone debt crisis has been to muddle through. Hence the muddle.